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We study the role of international financial integration in buffering natural disaster shocks, using a large sample of advanced and emerging economies. Natural disasters are largely unpredictable and unrelated to the state of financial integration. We document that integration improves the absorption of such shocks: output, consumption, and investment are significantly higher after a natural disaster in states of high than in states of low integration. The benefits are most clearly for advanced economies. Emerging markets tend to profit from financial integration, too, but the estimates are less precise unless we condition on institutional quality or consider only debt assets.
